In theory, it should be possible for government to
function efficiently while bargaining collectively with its employees. If PERA
has a saving grace, it is that in the event of a bargaining impasse, the local
government employer may implement its last, best offer. Before reaching this
point, however, the employer must be prepared to demonstrate to the state that
it has been bargaining in good faith throughout. It may also need to be
prepared for the nonbinding procedures of mediation and fact-finding.[11] In the end, though, it is legally possible
for local officials to take firm positions on matters that affect public
interests.

But for this to occur, the scope of bargaining needs
to be fairly narrow, so that collective bargaining has a minimal effect on
taxing, spending and basic government operations. Union political influence
would also need to be constrained to ensure that management’s bargainers are
effective representatives of the community at large.

One local
government has managed to achieve something approximating this state of
collective bargaining nirvana: Oakland County.[12]
The county’s experience is extremely atypical for local governments in
Michigan, however, and as we will see, it will be extremely difficult for other
localities to fully implement Oakland’s methods.

Oakland County’s approach to collective bargaining is
less a matter of technique than of mindset. Since PERA took effect, Oakland
County has refused to be drawn into the typical union-versus-management
framework that typifies labor relations in most other jurisdictions. Instead,
it has dealt with unions in a fair but firm manner that has reduced conflicts
but also has limited opportunities for union officials to exploit taxpayers.

In a legal environment where bargaining is explicitly
required, employers are tempted to approach bargaining sessions with a
defensive posture, take an extremely tough opening position, then make
concessions that will presumably be matched by union concessions until union
and management meet in the middle at an agreement that one hopes will be fair
and affordable. The problem with this approach is that the course of bargaining
remains fluid, and that all subjects — not just hours, wages and benefits, but
also working conditions that affect government operations — are open to
negotiation and manipulation.

According to Oakland County Director of Labor
Relations Tom Eaton, the county’s approach is to determine its budget and its
pay and benefit package for nonrepresented employees first. Oakland County also
turns to its Human Resources Department to establish work classifications and
standards. It then uses its pay package for nonrepresented employees as the
basis for bargaining with unionized workers.[13]
Because the package extended to nonrepresented workers must be competitive with
the private sector in order to retain employees, the corresponding initial
offer to unionized workers is likely to be reasonably attractive as well, but
from there, the county’s position is fairly firm.[14] The county is willing to make changes, but
the union needs to be able to show the reasons behind its positions, and the
reasoning has to be the sort that would be persuasive to both elected officials
and the public at large. The bargaining team strives to ensure that the
interests of taxpayers are not forgotten. The bargainers’ interest in getting a
deal done takes a back seat to the concerns of the general public. As Eaton
puts it: “Give us a reason. We have people to convince.”[15]

The other key to Oakland County’s approach is that
the county’s budget is largely set prior to collective bargaining — tax rates
and spending needs are determined outside of collective bargaining, and the
contract is framed to fit those, rather than the other way around. This element
is critical for maintaining the county’s fiscal condition. “It’s where you put
the cart in relation to the horse,” says Eaton, who is the county’s lead labor
negotiator. “The budget sets the parameters for bargaining.”[16]

This “best offer up front” approach to bargaining can
generate controversy and requires some legal and diplomatic skill to pull off.
PERA’s good-faith bargaining standards are premised upon give-and-take at the
bargaining table. While neither union nor management is required to make any
particular concessions as bargaining continues, PERA does put pressure on both
sides to make compromises as talks go on, if only for the sake of appearances.
When an employer makes its best offer up front, it limits its own ability to make
tactical concessions.

If done skillfully, however, this approach yields
substantial benefits: It limits the overall range of bargaining, increasing the
likelihood that the final contract will be consistent with the county’s overall
policies. The method also improves the county’s standing among its own
employees. When an employer stakes out a tough opening position for purely
tactical reasons, employees may be misled into thinking that the employer’s
opening demands are more serious than they actually are. Opening with one’s
best offer gives employees a more realistic sense of the employer’s goals and
reduces the risk that union officials will use the employer’s initial offer to
build resentment against management.

Oakland County’s approach to collective bargaining
tends to lower the stakes in bargaining itself. This limits the influence of
union officials, but is not necessarily detrimental to government employees. As
Eaton puts it: “Would you rather we be honest and upfront, or would you rather
we lowball you?” In collective bargaining, honesty combined with smart planning
is the best policy.

Another noteworthy feature of Oakland County’s
collective bargaining agreements is the general absence of “agency fees.” The
overwhelming majority of collective bargaining agreements feature agency-fee
clauses stating that all workers covered by the agreement must pay union dues
or fees regardless of their support or opposition to the union. Agency fees
effectively guarantee unions a permanent flow of money. Oakland County,
however, has only one agency-fee contract.[17]
That contract covers deputy sheriffs, who are unique in having access to
binding arbitration in the event of a bargaining impasse.

The county is also noteworthy for having established
a “defined-contribution” pension plan for all county employees hired after June
1994.[*][18] Defined-contribution plans are far less
risky than traditional defined-benefit pensions and rarely develop unfunded
liabilities that burden future generations.

Unfortunately, Oakland County’s strategies and
experiences with collective bargaining are unusual. For instance, few
communities or school districts have managed to avoid awarding unions agency-fee
clauses in contracts. So while one rarely encounters the opposite extreme of
budgeting following bargaining and contracts dictating spending, it would
appear that few local governments meet Oakland’s standards for discipline.

However unfortunate, this is to be expected.
Successful negotiations for government are dependent upon unity among members
of the executive (mayors, county executives) and lawmaking branches (city
councils, county commissions). This unity allows bargainers to act decisively.
An ill-considered statement by an elected official will still carry
considerable weight with the media and the public and create expectations among
employees. As Warren Executive Administrator Louis Schimmel, a mayoral
appointee, describes it: “If you don’t have council behind you, it can be very
difficult. Sometimes you have council members talking behind your back with the
union or with employees. What’s a negotiator to do?”[19]

But political divisions are an unavoidable part of
democratic government. Natural ideological or interest-group divisions in local
governments are compounded by the political power amassed by many government
employee unions — power that is augmented by agency-fee funds. The temptation
elected officials face to secure their current position or prepare for higher
office by currying favor with government employee unions is considerable, and
union officials are certainly capable of using this weakness to gain advantages
at the bargaining table. A city where the council unites with a mayor or city
manager to pursue fiscal discipline and responsible bargaining will be
uncommon.

In addition, good collective bargaining in the
government context requires expertise that many smaller communities may be
unable to find. According to Schimmel:

You absolutely need a great budget guy. If you
don’t have your budget and all the supporting documents together, the union
representatives will just eat you up. They’ll ask you question after question
that you don’t have answers for, and if you don’t have answers, it gets to be
really hard not to give in. They’ll say you have to have money available
somewhere.[†]

In theory, local governments could take steps to
improve their budgeting and bargaining practices and encourage local officials
to present a united front to unions. In practice, this is all highly unlikely.
If collective bargaining is to evolve into a form compatible with sound fiscal
practices, a well-funded and entrenched interest — government employee unions —
will need to adjust its expectations downward, something that rarely happens in
government without an intense political fight. At the same time, local elected
officials throughout the state, many of whom may be dependent on government
employee unions for political support or campaign funding, will have to unite
around an agenda of fiscal responsibility and remain united for the long haul.
Given the fractious nature of democratic politics and the ubiquity of agency
fees, which give unions more resources to exploit divisions or sow discord,
this is also highly unlikely.

To sum up, one could imagine a world in which PERA
works much better than it has. Oakland County’s practices show one way this
might have happened. But the practices of governmental collective bargaining in
Michigan are set, and the interest groups that have benefited most from those
practices are well-financed. It is unrealistic to expect them to change absent
changes to the law itself.

[*] As described by Mackinac Center Adjunct
Scholar Richard Dreyfuss, “In a defined-contribution plan, the employee and/or
employer make ongoing contributions to a tax-favored account. These are
invested, and they accumulate for the benefit of the individual at retirement.
Generally, the investment decisions and the associated investment risks are the
responsibility of the individual. Upon retirement, the employee can withdraw
the account balance as either a lump sum or an annuity, according to the
provisions of the plan.” In contrast, “In defined-benefit plans, the employer
assumes the responsibility of annually investing employer and employee pension
contributions in amounts sufficient to finance a projected annual retirement
income or projected insurance premiums for such items as retiree medical,
dental and vision insurance. The projected benefits are generally set by a
formula.” See Richard Dreyfuss, “Michigan’s Public-Employee Retirement Benefits:
Benchmarking and Managing Benefits and Costs” (Mackinac Center for Public
Policy, 2010), 3, http://www.mackinac.org/13862 (accessed Feb. 13, 2011).

[†] Louis Schimmel, Warren
executive administrator, interview with Paul Kersey, June 4, 2010. Schimmel
previously served as a court-appointed receiver for the small Michigan town of
Ecorse, where he privatized city services and renegotiated union contracts. See
Robert Daddow, “Responding to
Municipal Fiscal Crisis: Bottom Line Lessons From Ecorse, Michigan” (Mackinac Center for Public Policy, 1992),
http://www.mackinac.org/261 (accessed Feb. 13, 2011).